Tembec reports financial results for its first quarter ended December 29, 2012 MONTREAL, Jan. 31, 2013 /CNW Telbec/ - Consolidated sales for the three-month period ended December 29, 2012, were $376million, as compared to $401million in the comparable period of the prior year. The Company generated a net loss of $10million or $0.10 per share in the December 2012 quarter compared to a net loss of $16million or $0.16 per share in the December 2011 quarter. Operating earnings before depreciation, amortization and other items (adjusted EBITDA) was $19million for the three-month period ended December 29, 2012, as compared to adjusted EBITDA of $12million a year ago and adjusted EBITDA of $23million in the prior quarter. Business Segment Results The Specialty Cellulose Pulp segment generated adjusted EBITDA of $18million on sales of $103million for the quarter ended December 29, 2012, compared to adjusted EBITDA of $25million on sales of $127million in the prior quarter. The $19million decline in pulp sales was due to lower shipments of specialty and viscose grades. USdollar and euro prices for specialty grades and viscose grades were relatively unchanged quarter over quarter. However, with the Canadian dollar weakening by 3.2% versus the euro, Canadian dollar equivalent pricing increased by $2million or $39per tonne sold. The specialty cellulose market conditions remained favourable. Specialty cellulose shipments were equal to 65% of capacity as compared to 84% in the prior quarter. The relatively low level of shipments in the December 2012 quarter was due in part to the annual maintenance shutdown at the Temiscaming mill, which lasted 10 days. Inventories also increased by 4,700tonnes due to logistical delays in shipping orders in the latter part of the quarter. Mill manufacturing costs increased by $6million due primarily to annual planned maintenance at the Temiscaming facility. The balance of the decline in adjusted EBITDA relates to the previously noted decline in shipments. The Paper segment generated adjusted EBITDA of $6million on sales of $78million for the quarter ended December 2012, compared to adjusted EBITDA of $14million on sales of $96million in the prior quarter. Lower coated bleached board and newsprint shipments caused the $18million decrease in sales. In terms of markets, coated bleached board was stable. Newsprint also remained stable despite continued weaker NorthAmerican demand statistics. The US $ reference prices for coated bleached board declined by US$7per short ton while the US$ reference price for newsprint was unchanged. Currency was slightly negative as the Canadian dollar averaged US$1.009, a 0.6% increase from US$1.003 in the prior quarter. Overall, pricing was unchanged from the prior quarter. Coated bleached board shipments were equal to 86% of capacity as compared to 111% in the prior quarter. The shipment to capacity percentage for newsprint was 89%, compared to 103% in the prior quarter. The previous quarter shipment levels were not sustainable and a reduction in the current quarter was anticipated. As well, the coated bleached board mill in Temiscaming incurred six days of planned maintenance downtime in the most recent quarter. This in turn increased their manufacturing costs by $2million. Mill level costs at the newsprint mill increased by $3million due primarily to higher electricity costs. In the prior quarter, the newsprint mill had benefited from the very low rates. The balance of the decline in adjusted EBITDA was driven by the lower shipments. The Forest Products segment generated adjusted EBITDA of $2million on sales of $101million for the quarter ended December29, 2012, compared to adjusted EBITDA of $8million on sales of $108million in the prior quarter. Sales decreased by $7million due primarily to lower shipments of lumber and sawmill by-products. Demand for SPF lumber was stable with shipments equal to 84% of capacity, as compared to 86% in the prior quarter. US$reference prices for random lumber increased by US$23 per mbf while stud lumber decreased by US$18 per mbf. Currency was slightly negative as the Canadian dollar strengthened versus the US dollar. When combined with a lower sales mix factor, the net price effect was a decrease in adjusted EBITDA of $1million or $5per mbf. During the most recent quarter, several of the sawmills experienced planned downtime during the Christmas holiday period, increasing costs by approximately $2million. The winter months are also seasonally higher cost periods for the sawmills. In total, mill level manufacturing costs increased by $5million. The Paper Pulp segment generated nil adjusted EBITDA on sales of $117million for the quarter ended December 29, 2012, compared to negative adjusted EBITDA of $18million on sales of $140million in the prior quarter. The $23million decline in sales was due primarily to lower shipments as a result of the idling of the Chetwynd high-yield pulp mill that occurred in the prior quarter. Market conditions for paper pulp remained relatively weak. The benchmark price (delivered China) for Northern Bleached Softwood Kraft (NBSK) increased by US$32per tonne while reference prices for bleached eucalyptus kraft (BEK) declined by US$8per tonne. Currency was also a slight negative as the Canadian dollar strengthened versus the USdollar. Overall, paper pulp prices were relatively unchanged, declining by $5per tonne and reducing adjusted EBITDA by $1million. Paper pulp shipments were equal to 98% of capacity as compared to 91% in the prior quarter. Mill level manufacturing costs declined by $11million. In the prior quarter, the Skookumchuck NBSK mill had undergone its annual maintenance outage, which lasted seven days. Profitability also improved due to the closure of the Chetwynd high-yield pulp mill, which generated negative adjusted EBITDA of $5million in the prior quarter. In the December 2012 quarter, increasing selling prices led to an increase of $2million in the carrying values of finished goods and raw material inventories, increasing adjusted EBITDA. This is the opposite of what occurred in the prior quarter when declining selling prices had led to a $3million decrease in the carrying values of finished goods and raw materials. Paper Pulp inventories were at 29days of supply at the end of December 2012, as compared to 36days at the end of September2012. Assets Held for Sale The current period balance sheet classifies the assets and liabilities related to the Skookumchuck Northern Bleached Softwood Kraft (NBSK) pulp mill as "held for sale". This reclassification is required by IFRS as the Company is currently engaged in a formal sales process and expects to sell the facility within the twelve-month time frame specified under IFRS rules. Outlook Overall, the December 2012 quarterly results were in line with expectations. The Forest Products segment results declined versus what had been a very strong September quarter. The seasonal reduction in stud lumber prices combined with planned production curtailments during the holiday period reduced adjusted EBITDA. Looking ahead, the normal seasonal increase in prices is anticipated in the March quarter. While the recent housing statistics in the United States are encouraging, we continue to forecast a slow and gradual recovery in housing, with lumber demand and prices following a similar pattern. The Specialty Cellulose Pulp segment results were negatively impacted by the annual planned maintenance outage at the Temiscaming facility. Market conditions for specialty grades were stable while viscose grade prices continued to trend downwards. We anticipate a continued stable market for specialty grades. However, growth in this market has slowed and the Company's plans to increase volumes and reduce viscose grade production are being delayed. The Company will continue to maintain a relatively modest exposure of 30,000to 40,000tonnes per year to the viscose market. The latter market is currently under pressure as new capacity is exceeding demand growth. While the adjusted EBITDA improvement in the Paper Pulp segment was significant, it was coming off a very difficult September quarter, which had included a costly annual planned maintenance outage at the Skookumchuck pulp mill. The closure of the relatively high cost Chetwynd mill in the prior quarter also had the expected positive effect on segment performance. The Company anticipates further cost reduction when the new anaerobic plant in Matane becomes fully operational. However, paper pulp markets remain relatively weak as evidenced by the segment's breakeven results in the most recent quarter. While we have seen the implementation of small increment price increases, we expect the market for paper pulp to remain challenging in the near term. Paper segment results declined as the prior quarter had benefited from very strong shipment levels as well as very low energy costs at the newsprint mill in Kapuskasing. Looking forward, prices for coated bleached board should be stable while newsprint prices may see a small decline. Recently restarted newsprint capacity combined with continued declining North American demand will not be conducive to improved prices. The Company continues with its capital expenditure program, with a strong emphasis on its two specialty cellulose mills. The cornerstone of the program is a $190million high-pressure boiler and turbine to be installed at the Temiscaming, Quebec, site. The project will materially improve the mill's cost structure and margins. A total of $78million has been spent on the Temiscaming specialty cellulose project to the end of the December 2012 quarter. The project schedule and total estimated costs are currently under review. The Company also has several other smaller capital projects, which are either in start-up mode or nearing completion. These projects will begin to positively impact manufacturing costs and adjusted EBITDA in the coming quarters. As noted in the quarterly disclosure material, the assets and liabilities of the Skookumchuck, BC, NBSK pulp mill have been classified as held for sale. The Company is currently in discussions with potential buyers and any future developments will be disclosed as they occur. Tembec is a manufacturer of forest products - lumber, pulp, paper and specialty cellulose - and a global leader in sustainable forest management practices. Principal operations are in Canada and France. With annual sales of approximately $2 billion, Tembec has 3,700 employees and is listed on the TSX (TMB). The full quarterly report, including the interim Management Discussion and Analysis, the interim financial statements and the accompanying notes for the quarter ended December29,2012, can be obtained on Tembec's website at www.tembec.com or on SEDAR at www.sedar.com. This press release includes "forward-looking statements" within the meaning of securities laws. Such statements relate, without limitation, to the Company's or management's objectives, projections, estimates, expectations or predictions of the future and can be identified by words such as "may", "will", "could", "anticipate", "estimate", "expect" and "project", the negative or variations thereof, and expressions of similar nature. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience, information available to it and its perception of future developments. Such statements are subject to a number of risks and uncertainties, including, but not limited to, changes in foreign exchange rates, product selling prices, raw material and operating costs and other factors identified in the Company's periodic filings with securities regulatory authorities. Many of these risks are beyond the control of the Company and, therefore, may cause actual actions or results to materially differ from those expressed or implied herein. The forward-looking statements contained herein reflect the Company's expectations as of the date hereof and are subject to change after such date. The Company disclaims any intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities legislation. TEMBEC INC. CONSOLIDATED BALANCE SHEETS (unaudited) (in millions of Canadian dollars) Dec. 29, Sept. 29, 2012 2012 ASSETS Current assets: Cash and cash equivalents $ 56 $ 87 Restricted cash 1 5 Trade and other receivables 156 200 Inventories (note 3) 235 255 Biological assets 1 - Prepaid expenses 3 7 Assets classified as held for sale (note 4) 141 - 593 554 Property, plant and equipment (note 5) 417 485 Biological assets 4 4 Other long-term receivables 11 12 Deferred tax assets 2 4 $ 1,027 $ 1,059 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Operating bank loans (note 6) $ 69 $ 68 Trade, other payables and accrued charges 174 230 Interest payable 2 10 Income tax payable 5 3 Provisions (note 8) 2 3 Current portion of long-term debt (note 7) 16 16 Liabilities classified as held for sale (note 4) 32 - 300 330 Long-term debt (note 7) 348 323 Provisions (note 8) 16 17 Employee future benefits 260 285 Other long-term liabilities 2 2 926 957 Shareholders' equity: Share capital (note 9) 567 564 Deficit (463) (453) Accumulated other comprehensive loss (3) (9) 101 102 $ 1,027 $ 1,059 The accompanying notes are an integral part of these interim consolidated financial statements. TEMBEC INC. CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars, unless otherwise noted) Quarters ended Dec. 29, Dec. 24, 2012 2011 Sales $ 376 $ 401 Freight and other deductions 50 53 Lumber export taxes 1 2 Cost of sales (excluding depreciation and amortization) 286 316 Selling, general and administrative 19 18 Share-based compensation (note 9) 1 - Depreciation and amortization 11 12 Other items (note 10) 1 2 Operating earnings (loss) 7 (2) Interest, foreign exchange and other 7 10 Exchange loss (gain) on long-term debt 4 (2) Net finance costs (note 11) 11 8 Loss before income taxes (4) (10) Income tax expense (note 12) 6 6 Net loss $ (10) $ (16) Basic and diluted net loss in dollars per share (note 9) $ (0.10) $ (0.16) TEMBEC INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS) Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars) Quarters ended Dec. 29, Dec. 24, 2012 2011 Net loss $ (10) $ (16) Other comprehensive earnings (loss), net of income taxes: Foreign currency translation differences for foreign operations 6 (5) Total comprehensive loss $ (4) $ (21) The accompanying notes are an integral part of these interim consolidated financial statements. TEMBEC INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars) Quarter ended December 29, 2012 Translation Share of foreign Shareholders' capital operations Deficit equity Balance - beginning of period, September 29, 2012 $ 564 $ (9) $ (453) $ 102 Net loss for the period - - (10) (10) Other comprehensive earnings, net of income taxes: Foreign currency translation differences for foreign operations - 6 - 6 Issue of warrants (note 9) 3 - - 3 Balance - end of period, December 29, 2012 $ 567 $ (3) $ (463) $ 101 Quarter ended December 24, 2011 Translation Share of foreign Shareholders' capital operations Deficit equity Balance - beginning of period, September 24, 2011 $ 564 $ 2 $ (333) $ 233 Net loss for the period - - (16) (16) Other comprehensive earnings (loss), net of income taxes: Foreign currency translation differences for foreign operations - (5) - (5) Balance - end of period, December 24, 2011 $ 564 $ (3) $(349) $ 212 The accompanying notes are an integral part of these interim consolidated financial statements. TEMBEC INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars) Quarters ended Dec. 29, Dec. 24, 2012 2011 Cash flows from operating activities: Net loss $ (10) $ (16) Adjustments for: Depreciation and amortization 11 12 Net finance costs (note 11) 11 8 Income tax expense (note 12) 6 6 Income tax paid (2) - Excess cash contributions over employee future benefits expense (11) (10) Gain on sale of assets (note 10) (2) - Other (4) 2 (1) 2 Changes in non-cash working capital: Trade and other receivables 24 14 Inventories 2 (34) Prepaid expenses 2 2 Trade, other payables and accrued charges (31) (17) (3) (35) (4) (33) Cash flows from investing activities: Disbursements for property, plant and equipment (40) (23) Proceeds from sale of net assets (note 10) 2 17 Other - (3) (38) (9) Cash flows from financing activities: Change in operating bank loans 1 42 Change in restricted cash 4 (2) Increase in long-term debt 24 4 Repayments of long-term debt (1) (3) Interest paid (18) (15) Other - (1) 10 25 (32) (17) Foreign exchange gain (loss) on cash and cash equivalents held in foreign currencies 1 (3) Net decrease in cash and cash equivalents (31) (20) Cash and cash equivalents, beginning of period 87 99 Cash and cash equivalents, end of period $ 56 $ 79 The accompanying notes are an integral part of these interim consolidated financial statements. TEMBEC INC. BUSINESS SEGMENT INFORMATION Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars) The Company operates an integrated forest products business, which is managed in four segments. During the December 2012 quarter, the Company reorganized its internal reporting structure. The High-Yield Pulp segment was renamed the Paper Pulp segment and now includes the chemical pulp mill that was previously part of the Specialty Cellulose and Chemical Pulp segment. The latter was then renamed the Specialty Cellulose Pulp segment. The Forest Products and the Paper segments were unaffected by the organizational changes. The segments are: -- The Forest Products segment consists primarily of forest and sawmills operations, which produce lumber and building materials. -- The Specialty Cellulose Pulp segment consists primarily of manufacturing and marketing activities of specialty cellulose including the transformation and sale of resins and pulp by-products. A significant portion of chemical products sales are related to by-products generated by the two specialty cellulose pulp mills. -- The Paper Pulp segment includes the manufacturing and marketing activities of high-yield pulps and chemical pulps. -- The Paper segment consists primarily of production and sales of coated bleached board and newsprint. Intersegment transfers of wood chips, pulp and other services are recorded at transfer prices agreed to by the parties, which are intended to approximate fair market value. The basis of presentation and the accounting policies used in these business segments are the same as those described in note 2 and 3 of the Company's audited consolidated financial statements for the year ended September 29, 2012. Comparative prior period segment information has been restated to conform with the new segment presentation. The performance of each segment is evaluated by management of the Company against short-term and long-term financial objectives as well as environmental, safety and other key criteria. The financial performance is measured based on earnings before interest, income taxes, depreciation and amortization, and other specific or non-recurring items (adjusted EBITDA). This measure is included in the internal reports that are reviewed by senior management. Segment adjusted EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating financial results relative to other entities that operate within similar businesses. Net finance costs and income tax are not allocated to operating segments. Quarters ended December 29, 2012 and December 24, 2011 (unaudited) (in millions of Canadian dollars) Quarter ended December 29, 2012 Specialty Forest Cellulose Paper Consolidation Products Pulp Pulp Paper Corporate adjustments Consolidated Sales: External $ 85 $ 103 $ 110 $ 78 $ - $ - $ 376 Internal 16 - 7 - 4 (27) - 101 103 117 78 4 (27) 376 Freight and other deductions 9 7 23 11 - - 50 Lumber export taxes 1 - - - - - 1 Cost of sales 86 73 92 58 4 (27) 286 Selling, general and administrative 3 5 2 3 6 - 19 Share-based compensation - - - - 1 - 1 Earnings (loss) before the following (adjusted EBITDA): 2 18 - 6 (7) - 19 Depreciation and amortization 2 3 5 1 - - 11 Other items (note 10) - - - - 1 - 1 Operating earnings (loss) $ - $ 15 $ (5) $ 5 $ (8) $ - $ 7 Additions to property, plant and equipment $ 2 $ 26 $ 5 $ 1 $ - $ - $ 34 Total assets $ 207 $ 426 $ 279 $ 115 $ - $ - $ 1,027 Total liabilities $ 59 $ 213 $ 67 $ 123 $ 464 $ - $ 926 Quarter ended December 24, 2011 Specialty Forest Cellulose Paper Consolidation Products Pulp Pulp Paper Corporate adjustments Consolidated Sales: External $ 100 $ 123 $ 93 $ 85 $ - $ - $ 401 Internal 26 - 10 - 2 (38) - 126 123 103 85 2 (38) 401 Freight and other 12 10 20 11 - - 53 deductions Lumber export taxes 2 - - - - - 2 Cost of sales 118 84 88 62 2 (38) 316 Selling, general and administrative 5 4 2 2 5 - 18 Share-based compensation - - - - - - - Earnings (loss) before the following (adjusted EBITDA): (11) 25 (7) 10 (5) - 12 Depreciation and amortization 3 2 6 1 - - 12 Other items (note 10) 2 - - - - - 2 Operating earnings $ (loss) $ (16) $ 23 (13) $ 9 $ (5) $ - $ (2) Additions to property, plant and equipment $ 4 $ 12 $ 5 $ 2 $ - $ - $ 23 Total assets $ 256 $ 359 $ 340 $ 121 $ 6 $ - $ 1,082 Total liabilities $ 83 $ 175 $ 69 $ 141 $ 402 $ - $ 870 Investor Contact: Michel J. Dumas Executive Vice President, Finance and CFO Tel: 819 627-4268 E-mail:email@example.com Media Contact: Linda Coates Vice President, Human Resources and Corporate Affairs Tel.: 416 775-2819 E-mail:firstname.lastname@example.org SOURCE: TEMBEC To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/January2013/31/c9846.html CO: TEMBEC ST: Quebec NI: PAP ECO FIN ERN -0- Jan/31/2013 13:21 GMT
Tembec reports financial results for its first quarter ended December 29, 2012
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